Tech workers who are engineering a mid-30s retirement | Hacker News Reader

Tech workers who are engineering a mid-30s retirement

story.californiasunday.com

73 pointsasoli85 comments

The premise of this article is that if you work hard and build a large pool of cash, you're "set" for life. So many problems with that. Most people, despite high pay and best efforts, continue to live the rat-race.

That said, what I hope is insightful about this article is that it teaches that having money can easily lead to having much more money.

If you start with $5M in the bank from family or whatever, you can make more from interest than most experienced professionals in any field can make from their skills. Meaning, sitting on wealth is often far more profitable than trying to earn it.

It's a testament to how money disproportionally begets more money and how inequality seems to almost naturally increase.

Please help me understand how one can possibly live a good life, let alone prosper for decades with $5M in the bank without actually spending these millions.

When I look around here in Europe, even a 1% interest seems hard to get - some people even pay to have their money in the bank.

Even if you get 1% interest on average through the years, it's just 50k before tax which is can be barely enough to support a family in the developed world.

>it's just 50k before tax which is can be barely enough to support a family in the developed world.

That's enough for Eastern Europe, as a example.

Stick it in an index fund and you'll probably get at least 4% per year on average. That's 200k.

Look for long term stocks - ones with real value that also pay dividends. You can get dividends in the 3-5% range. You also hope that the stock price will at least keep up with inflation, but that is a separate issue to track.

Other options include buying a small business. Some don't require their owner to put in full time to make OK money.

Small businesses can definitely be great, since you (generally) don't need to put in much equity and can acquire the business mostly with debt.

A $3 to 500k investment might yield you an annual $300k owner salary.

Can you provide examples of what types of businesses for this profile?

FIRE literature typically uses a 4% withdrawal rate. In some calculators that's the same as the supposed return on investment, some allow you to specify your own return on investment. In US index funds 4% seems like a "safe" lower bound.

US Treasury bonds are currently yielding more than 2.5% and are generally considered pretty safe. And even though a bank account is a terrible place to stash so much money, I think you'd find a better than average interest rate if you did have $2 million to stick in the bank.

You start to learn how to invest that money, which is a job in itself. You can't just put it in T-bills or bonds and call it a day.

It's not impossible to book 10 to 15% (or higher) returns by actively managing your money. But it's not exactly easy.

1% is what the bank gives you on a standard savings account, investment saving accounts would yield higher returns 5-8% yearly is not unheard off.

And yes taxation in Europe makes accumulating wealth nearly impossible which is why almost all the money in Europe is old money.

Shell is yielding over 6% and depending on when you brought your implied yield is much higher

You do know that this low interest period is very unusual?

You also need to read up on investing if all you think you can do will 5 mill is stick it in a bank account

It's no use being jealous of those that have lots of money. It comes with it's own problems, by the way.

The good lesson of the article is this: If we spend less than we make (no matter the amount), we can eventually stop working if we allow the magic of compound interest to work for us.

After projecting their monthly cost of living, the Rooses determined they’d need $300,000 in investments to be able to live off the dividends

This number seems impossibly low to me. At an - optimistic - 5% return that’s $15k/year between 2 people without allowing for inflation eroding the capital. A lifestyle of traveling means buying airline tickets etc even if they stick to locations with a very low cost of living. And presumably one day they would want to return to the West.

The "standard" advice is the 4%-rule -- the idea that you can withdraw an inflation-adjusted 4% of your original portfolio in perpetuity. 5% is aggressive and has failed historically. They're probably looking at $12k/year spending for two people. If you want to move to live on this much, you have to live like a local, and it might not be super pleasant.

Indeed. If you are going to do this then your capital has two jobs, it has to support you while you travel, and it has to bootstrap you back into Western life when you return (such as covering rent/deposit on a mortgage etc etc while you job hunt). Three jobs in fact as it has to give you a buffer for emergencies, if you have a health situation or need a quick repatriation for any reason. Traveling means not living like a local in a poor country, because the locals aren't hopping on a plane at the drop of a hat, they live where they live and are pretty much stuck there. And you won't be having much fun if you have money worries hanging over your head!

Without thinking about it especially much I'd guess you'd want at least a mil in capital to pull this off, perfectly possible to achieve living a frugal lifestyle while working in Big Tech for 10 years - if you could bear it for that long.

One thing people forget is the mental overload of making $150-200k a year but spending 20-25% of that. Yes, initially if you've never saved or had money before it feels good to sock away $4k+ out of each paycheck. But eventually when you look at your bank account and see tens or hundreds of thousands of dollars you start wonder why you can't just go have that $100 dessert you saw on YouTube.

Living like a pauper for ten years while having to get multiple bank accounts to handle FDIC coverage is harder than it sounds.

I’d imagine your main savings vehicle would be Vanguard funds with dividends reinvested, try to get benefits of compounding as early as possible. But you are right the psychological overhead of being the only one of your friends to miss out on everything would take a huge toll.

These people aren't keeping hundreds of thousands of dollars in cash. It's all in low-fee index funds.

That's why it is important to still have disposable income after your expenses are taken care of. But the more important item, is general life stress. A lot of stress situations can be made to go away if you throw money at it (things like a constantly-breaking car, or living in a high crime area, or general boredom). That is the main reason that people have a hard time saving at almost any income level (until you hit over 70 - 85K).

If you're willing to travel much slower you don't have to buy plane tickets; trains are much cheaper in most parts of the world. If they did base the number on their current expenses, presumably they'll be fine with the kind of lifestyle they'll be able to afford. Of course they'll need to get back to work if they ever want to increase their spending, but that doesn't really leave them worse off.

300k sounds really low. Unless they have a free and clear home with low property taxes.

For example I lived on 900 USD a month (saving over 90% if my income) for a couple years. I can’t imagine two people living off just 300k, unless it’s, again, a free and clear rental property that they manage themselves.

Living off $12k is not in any realm of "impossible" in a first world country. It may come as a surprise (halfly sorry for the snark), but most of the world (60%) lives under less than $1800/yr. The dreadfulness and despair of it goes away when it's a personal choice to live frugally.

There's a lot of things you can get for free or dirt cheap, when you choose to see the deals.

But they are not paying First World prices for anything. $12k/year between two people, owning no other assets than their $300k capital is not really do-able in the West. You could if you already owned 40 acres and were mainly self-sufficient.

I believe 13% of people+families survive under $12k/year in the U.S, i.e poverty. Stretching $7k with one person living in a city, is by no means impossible. Extremely uncomfortable by what you may have become accustomed to? Of course.

You can buy a day's meal at Walmart for $2. You can also couch surf indefinitely. And repair all of your current possessions, instead of replacing them. Such as clothes and electronics. There is a world of possibility.

You can buy a day's meal at Walmart for $2.

There is a misguided individual here in the UK called Jamie Oliver who says things like that... It's true if you have the money upfront to buy in bulk. And somewhere to store it all, somewhere clean and dry, and a freezer. And a kitchen, and energy to boil water and run the oven. And know how to cook and have the time to do it (easy if you are "retired", not so much if you are working several minimum wage jobs). Etc, etc, etc.

I could spend very little on actual ingredients and have tasty, nutritious food every day, because everything else is taken care of. But I would never be so facile as to extrapolate that to someone without all the prerequisites that make it possible.

They're usually receiving significant government benefits in terms of healthcare, rental, and food subsidies. They're earning $12K/year, but certainly not living on that.

With £200k in liquid assets in the U.K. you would be unlikely to qualify for many benefits - especially if you had chosen to quit your job for no particular reason.

the reason doesn't matter for the DHSS

That's way to low even if you magically own your own home v unlikely in CA. Even if you have an inherited home back in Oz its way to low.

You'd need around a £million to maintain a decent but not rich life style.

To give an example I have about $200k invested 70% in stocks and am yielding about $5k in income (which is reinvested in the moment). Ok I am not optimising for income over growth but no way could I live well on just that.

Every time I read about people with hyper-strict future modeling schemes like this, I think of Nassim Nicholas Talebs Black Swan theory.

These kids would be one accident, unexpected disease or economic crash away from being abruptly summoned out of their 'early' retirements. That or they would realise they want to have kids. Or they'll get tired of beans in their 40s.

But by then, they'd have years open on their resumes, or have lost touch with the skills needed to generate the income needed to pay for those unforeseen emergencies.

Or maybe I'm just cynical.

I tend to agree about the hyper-strict parts (e.g. less than $500k in savings).

The thing to think about is whether or not you'd be better off if you kept a job, but had a lower savings rate. How certain are you that you'd be able to keep earning money through a disease or recession on the "job only" track?

The other thing is that with $1.3 million in savings, the 4% withdrawal rate puts your annual spending allowance at the median household income in the USA. In other words, just having that amount saved means you're earning more than 50% of the US.

There is a gray area between $500k of savings (income near the poverty line for family of 3) and 1.3 million, but I think the risks of the FIRE strategy are a little over-stated.

I think the ideal situation is to put in the hard work for 10 years, and have enough to give yourself a form of basic income. How many people have great ideas and a desire to start a business (even if it is just a consulting gig) but don't want to walk away from a stable job? To me, this is a very good strategy, that way your skills don't deteriorate, yet you don't "have" to work so it takes less mental toll.

I'm trying to do this as well and I think for me a "soft retirement" should be achievable when I reach 40 years of age (currently I am 36).

I'm from the Netherlands but have a Thai girlfriend and since 1 year a daughter as well. The house we're building is almost finished. It's not too expensive, around 38.000 EUR and it should suit the 3 of us well. I paid for it, but the house is 100% my girlfriend's property. If we'd split up it would be a slight set back for my plans, but manageable. This year we will also buy a car, will will be fully my property.

For a soft-retirement I expect to need at least 150.000 EUR into index-funds. That should hopefully average out in around 10.000 EUR a year - enough to live on in Thailand especially with a paid-off house and car. As long as no big accidents happen. In the long run I do aim to have quite a bit more money of course.

My next goal is to save at least 40.000 EUR a year for the next 3 years. I will probably need to make 55.000 EUR a year for this to become possible (spend 15.000 EUR on costs of living and save the rest). I think with remote work this should be achievable.

For now I still have a house in The Netherlands that should give me a 30.000 EUR profit after the house is being sold and the mortgage is paid off.

If I really need some money quickly and I'm having difficulty finding remote work, I can always go back to The Netherlands and freelance for a couple of months. Freelancing should earn me at least 10.000 EUR a month and I can probably avoid taxes using my offshore company as long as I don't spend more than 180 days a year in The Netherlands.

After reaching 150.000 EUR I will then probably still work for clients occasionally, but will take it slower and focus more on my own hobby projects. Perhaps after reaching 300.000 I can really "retire" (spend time with family, work on hobby projects, enjoy life to the fullest) :)

I would not sell your house just rent it out in case you need to come back. When I was young 5 or 6 the family next door moved Seattle to work for boing - they kept the house in the UK and rented it out which was lucky as when boing went through mass layoffs they had a house to come home to.

This is the crux of the problem:

> “I’ve never been a fan of waking up and going to work and exchanging time for money.”

If you believe your job is merely a transactional exchange of time and money, you need to find a new job. It doesn't have to be that way.

besides, investing capital to maximize return is of itself a full time job, especially with such a small initial capital.

And even those who do it full time under-perform the average 50% of the time.

Right, with that small sum of money you get a better return on your time by working for money. If they can really live with that little spending why get a job and save $100K per year and significantly add to the invested money? Of course I suggest that for "just a year or two" but when do you really stop?

Only 300k? Sure... But future you is going to be really pissed off that you sold him a lifetime of frugality.

Okay that's not fair. Maybe this really is a lifestyle for you. I sure hope you're not wrong.

That's not necessarily the end of your income. You can make money in various ways.

Then why not just get a job ?

I imagine the point is that you have achieved fuck you money and know that you don’t need to.

but "making money in other ways" just sounds like having lots of odd jobs. That's my problem with Mr Moustache Man, he is supposedly retired, but by my count, between him and his wife, they have 5 jobs. Then why not just get one really good one. I mean, it's great if they love their 5 jobs, but that's just called working at a job you like, not being retired. My father in law is retired and he doesn't do any jobs for money - that's to me the definition of retirement, not having odd jobs here and there.

One bummer about this type of lifestyle optimization is the way that it is fragile to surprises you have no control over, like bad market timing or medical surprises. The odds of each surprise are small, but the odds of no impactful surprises are also small.

The risk, besides missing opportunities to explore life or have an impact on others, is sub-optimizing for financial independence. As an example, optimizing for income (even if increased expenses leave you with the less savings) can leave more options to respond to surprises than making sacrifices to permit a cheaper lifestyle.

> as an example, optimizing for income (even if increased expenses leave you with the less savings) can leave more options to respond to surprises than making sacrifices to permit a cheaper lifestyle.

Can you give some concrete examples of how this might work?

I read your comment as suggesting to optimise for higher absolute revenue but lower absolute profit, which I find confusing - since it seems less useful than just optimising for profit - so maybe I'm not understanding what you are saying, or not fully understanding the consequences.

Sure! Let's compare taking your first job at a high salary in a high cost of living area, versus a lower salary in a cheap place. The latter might net you more after-tax "profit" in the early years, but several factors can upset that balance over time:

- Exponential raises (x% per year) cause the higher pay to more rapidly outpace the baseline costs of living, even if higher. - Many unexpected expenses, like a medical disaster or market losses, can offset taxes on higher income, leaving room to more rapidly recover if you have a higher income. - Once you've established a higher salary point, it is generally easier to retain it, even if you take steps to mitigate your costs like moving farther outside the city.

These are just some examples. Overall, having a higher income opens up more possibilities for investments that alter the cost dynamics of the system, versus putting up with the cost dynamics that are available to lower income folks. For the same reasons the get rich richer, limiting yourself to the options of the poor can reduce your opportunities.

Edit: I should note that this doesn't take into account cases where you find special opportunities in a low cost area! I know folks who were able to reinvest surplus income from early jobs in local businesses, effectively acting higher up the capital food chain earlier in their lives, because they stayed in cheap places. However, this is a more active strategy that didn't seem to be the same spirit of the "save more from your income so you can retire early" OP.

I agree, but also I've recently learned about all the different types of insurance one can buy. This means you could reasonably well hedge against these issues that affect one who isn't earning a salary.

300k is laughable. 2-3M is a more plausible figure if you want to finance two people purely off passive income.

Came to say the same - unless you lived in, say rural India, there is just no way you can live off the dividends from a $300k investment.

$300k of investment yields roughly $1k a month, which is doable in the US. You just have a studio apartment in Indiana or something, and do very little other than cook very economically.

and don't have health insurance, or a car (in rural indiana)

You qualify for significant ACA subsidies at that income level. And there's small towns where not having a car isn't that much of a problem.

Like, you're under 133% of the poverty line, so you pay no more than 2% of your income on health insurance premiums.

But do you still qualify if you are sitting on a pile of investments? Don’t think you would in the UK.

You do, but the pile of investments is either generating income or losing value to inflation, so in practice it's not that much of an issue. You can't spend tax-deferred retirement accounts like a 401k or tIRA without realizing taxable income, and there's significant contribution limits for Roth IRA balances for tax-exempt gains. You can defer capital gains but not dividends, so a large stock portfolio doesn't help you much either.

Plus if you manage your income to stay under ACA subsidy limits, you're generally going to be paying a higher effective tax rate by forgoing tax-deferral opportunities at higher tax brackets in your income earning years or Roth IRA conversions to use up lower tax brackets in your post-retirement years.

So yeah, it's a pretty big loophole.

I spend about $800 monthly on 2 people in Croatia's capital. I do think I'm living a good life.

I'm slowly accumulating my QQQs and SPYs and will probably stop it at a similar amount.

> There were her ethics ("anti-consumerist, anti-capitalist, for social good")

And yet she's working a six-figure job in Silicon Valley writing software for Lyft? And her whole goal is to suck as much money as possible so she can exit the system? Okay.

From my perspective, her plan seems strictly better than sucking as much money as possible while staying dependent upon the system. It seems pretty pragmatic to me.

What would you suggest as a better alternative? It sounds like financial security is important to her.

(disclaimer: i have a somewhat similar plan, although i can't coherently identify as anti-capitalist, as that seems to be a key component of "FIRE" - maximise surplus, invest surplus in capital, use capital to produce labour-free returns on investment...)

I'd have more respect for an anti-capitalist viewpoint if you weren't using a capitalist system to make a living. It stinks of wanting to take a holier-than-thou position while not making any real sacrifices to support such a position.

I don't think she has realized that she cannot exit the system. If your entire FIRE plan depends on "save enough, withdraw 3-4% every year" because those are "historical market returns", she is essentially depending on capitalist, consumerist system to keep providing her those returns on her savings during the retirement. Even worse, she is going to be one of those "evil capitalists who don't work a regular job and survive off of the labor of others because they are the owners of capital" (TM).

My favorite book of this ilk is "How to survive without a salary" by Charles Long.

For understanding where the money goes, tracking every penny for 30 days is a good exercise.

US numbers are funny, I could easily retire with 200k in most places of the world, including Europe. Gotta get me a US salary job I guess.

How many years are you expecting to live with 200k saved? Spending 1k/month, you're looking at ~17 years. And that seems on the frugal side.

I live with 500-700Eur/month since multiple years and I live a life of luxury compared to most others (and with that I mean my friends from Western Europe) and that includes traveling. So that'd be about 25-30 years which I'd call enough for retirement. Don't forget: it's not like you'll never work again...honestly who wants to not work the next 30 years? there will always be some small jobs or part time projects which will produce some sort of income, even if not monetary

Well done! I'm curious how you manage it though.

I am not even that frugal, I live reasonable, but I spend lot of money on sport equipment, obviously I am not driving a Maserati or live in a Villa with pool, but neither do I live like a monk or live in hostel dorms, my luxury is that a) I don't have to work b) if I work I do what I enjoy and as many hours as I wish (which is probably the best of it) c) I can go wherever I want whenever I want.

Ok, but you're not really spilling the beans here. You could be living at your parent's place in Western Europe. Or perhaps you're living in rural India. That's what I'm wondering about.

But if you'd rather not explain, I understand.

Not in public, otherwise everybody will start doing it, more and more do already

Where in Europe can you retire on 200k? I mean, without going 'buy 15k plot of land in backwater Romania, live there in a wooden shack for the rest of your life'?

Maybe if you live alone in your own house at some small village and let goverment pay for your social security, medical and give you some additional pocket money (you get that in most EU countries). But still, forget travelling, splurging on new appliances and such.

The government will not pay anything for you if you have a considerable chunk of savings you can pay for yourself from. You are only really considered poor if you have no savings.

It depends on how you declare your savings, even if you declare your income out of invetment of 300k it might be less than poverty line and you might be able to claim some monetary help from govt. Anyway, even if you didn’t get those, your medical and social insurance should be paid by govt.

Funny you mention Romania. You can sleep on the beach from May to Oct in Veche Vama in a tent. I’m actually planning to do this.

For the rest of your life? And where would you stay the rest of the year? All of these things are fine when you're a student, but they're hardly realistic retirement plans.

*Vama Veche

So one “hack” is as follows: you live like a student in your 20s, then you put that savings into... well, rental properties (my preference) or the default low fee index fund recommendation. Then you just... peace out. Live like a bum and do work exchanges and volunteer things.

I’m only going to bum it for one year, as I still have some ambition left in my spirit, but people can do it indefinitely, and just go part time if they decide to work again.

> Where in Europe can you retire on 200k?

Albania, Kosovo, Moldova ...

Nonsense, you can comfortable and well live with <10k/y in Vienna, Prague and other big cities, in the countryside even less.

Nonsense, I live in central Europe.

Oh please. https://www.expatistan.com/cost-of-living/vienna - it's just as expensive as other European capitals, <10k/y is barely above poverty level - not to mention with kids. Please define 'comfortable' - because to most people, that includes living in a good area in a city or a detached house outside of that, not having to thrift shop for clothes and not having to grow your own food unless you like to. And most likely a car too, even if it's only an old and small one. And not having to worry about whether you have money to get a new washing machine when yours breaks. No way that's possible on e833 a month (assuming e here - $ is even more ridiculous).

You can live like student for 20k/year in Prague, sharing room with other person and dont go out much. Doable, sure but maybe not a great plan for next 40 years.

There are probably many places in the US where you could retire with 200k, you just wouldn't want to live there.

But beyond that, the US has a baked-in working culture. For any hard-worker, 200k won't be enough. Neither will $1M or $1B. Not saying this is healthy, it's just a part of being american.

I am surprised that the rent for (at least) 5 square meters is less than 2 gym memberships in the SV.

A few things. Life does tend to get more expensive. Kids cost more. Then your parents age and may need help. Around your 40s-50s is when these obligations really pick up.

They'll be bored out of their skulls in no time.

And if kids come along-- well, they'll want to go back to work anyway.

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